What are some best practices for benchmarking in accounting?

Benchmarking in accounting compares a company's financial performance and operational efficiency to industry standards or competitors. Key considerations include selecting relevant metrics aligned with company goals, choosing comparable companies in size and industry, accounting for the appropriate time period to avoid short-term fluctuations, and involving stakeholders (finance, operations, and management) to ensure actionable insights. A thoughtful approach to benchmarking enhances its usefulness for informed decision-making and sustained improvement.

The most important aspect of benchmarking is to have an apple-to-apple comparison. You should compare yourself within your industry and with the businesses of your size.

In my opinion, the best techniques for making or setting benchmark is to first identify your objective. Once the objective is clear, you can easily set a benchmark. For example, the cost and setting up of the sale price. You can set the benchmark for your cost calculation techniques. You will get idea to choose ABC (Activity based costing), relevant costing, marginal or absolute costing techniques. Benchmark helps you to compare your cost with industry or within organization. Happy learning

Have a different view on this subject. Benchmarking is something you do at final stage when u feel that you have the best practices and maximum efficiency. KRA and KPI very important in this aspect. Example KRA is to increase sales by 30% of which KPI should be something like segment wise sales in comparison to budget and forecast. Horses for courses in which case objective needs to established which could be KRA and KPI must be established of the areas which needs to be measured. scorecard can be established for comparison purpose and timely availability of data is very important for prompt action

It could be quite tricky when we start benchmarking with competitors or industry leaders because business model is different and circumstances in which they operate. It could only be an indicator but not absolute measure. Best way in my opinion is to compare with the target set for the year and improve it with passage of time.

Selecting a benchmark is not one size fits all. Experiment with each option and determine which is the best method for you. In the early stages of your organization, internal units such as a comparative trend analysis may be best.

In accounting, it's crucial to identify key performance indicators (KPIs) that are vital for your business. These KPIs are measurable performance metrics used to track progress and pinpoint areas for improvement. Common accounting KPIs include Days Sales Outstanding (DSO), Accounts Receivable Turnover, Inventory Turnover, Cost of Goods Sold (COGS), and Net Profit Margin. Once identified, set clear targets for each KPI, regularly collect and compare data against industry benchmarks. Use diverse sources, compare to similar businesses, consider external factors, and track progress over time. Benchmarking is a valuable tool to enhance accounting efficiency and performance.

Key criteria to be followed:- 1) Information needs to be sourced from once source by various parties 2) This is where ERP system plays a key role 3) In my previous assignment i had a rule that only information from ERP will be accepted and source from others will not be accepted. This discipline is very important

Any information presented by figures has to be supplemented by commentary to make it meaningful for the reader of information. The what and why of the information is required to stated

adaptability and flexibility is very important for any information that is presented. Another key factor is also to challenge respective stakeholders to improve what is being done. Best example i can quote is for automotive industry where u have no other option than to cut costs to stay in contention.